PERS rates for school districts expected to increase 6.48 percent for 2019

The actuary for the Public Employees Retirement System will present its “advisory” valuations based on 2016 data to the PERS board of trustees at its regular meeting Friday.

Milliman predicts districts’ contributions to PERS will increase $530 million for 2019-21.

PERS rates are set by valuations done at the end of odd-numbered years, while valuations based on even-numbered years are advisory.

According to Milliman, PERS’ unfunded actuarial liability climbed $3.5 billion to $25.3 billion, largely because of changes the board made in July to the assumed rate of return.

The actuarial liability is the amount owed to PERS members. It is paid by a combination of contributions and investment returns. The assumed rate of investment return was 7.5 percent, but the fund has averaged less than that in recent years. Employers have to make up the difference or the unfunded actuarial liability grows.

In July, the PERS Board lowered the rate to 7.2 percent, about what the fund earned in 2016. The decrease in the rate, however, means employers have to pay more. The unfunded liability is going up because there are limits on how much PERS can raise the employer contribution rates.

When there are big jumps in the unfunded liability, rate collars kick in to limit the amount of that rate increase passed on to employers. The rate collars loosen when the funding status falls below 70 percent.

With the increase in the unfunded liability, school districts’ large Tier 1 and Tier 2 pools will be 68 percent funded.

The PERS Board will meet again Dec. 1, when Milliman will present employer-specific advisory contribution rates. Actual rates will be released in September 2018.